During Insurity’s recent Connected 2020 conference, Karen Furtado, partner at Strategy Meets Action (SMA), shared a symbolic phrase to describe the dramatically shifting view of cloud adoption in the P&C insurance industry: “Why NOT cloud?”
Just five short years ago, insurers were asking the opposite, hesitating to host mission-critical applications outside their firewalls. Cloud has since become table stakes for insurers to improve operations and data analytics capabilities. In fact, SMA research shows that 84% of all 2019 core system technology purchases were deployed in a cloud environment.
What Caused Insurers to Clamor for Cloud?
Massive cloud migration sprang from insurers’ imperative to support a new breed of customers who want modern, flexible, and instant service with cutting-edge products to choose from. Unrestrained by an IT backlog—and unlike incumbent carriers—new insurtech players entered the industry in droves to support these customers. In response, insurers needed an infrastructure that facilitated more effective and efficient collaboration of internal and external data and systems to increase productivity and keep pace. In this sense, cloud became a true enabler of digital transformation for insurers to remain competitive. This momentum has become even stronger due to the COVID-19 pandemic, which forced many insurers into remote work conditions that require 24/7 availability and security, best delivered by the cloud.
Apart from the broader market influence on cloud growth, there are three core benefits to cloud solutions that help insurers grow and achieve greater profitability.
- Sharpened Focus on Core Competency. A cloud-hosted solution allows insurers to focus on what they know best, such as launching new insurance products and services that generate business value, while their software-as-a-service (SaaS) partners can focus on the infrastructure that supports these goals. Insurers shed the burden of installing and maintaining on-premise hardware, and, instead rely on experts that understand the breadth and depth of technology integration.
- Unlocked Scalability. A modern insurance company requires innovative and flexible solutions to match the ever-changing needs of their customers. In an on-premise environment, insurers simply don’t have the agility to build new products without incurring IT infrastructure costs. Cloud provides flexible resources that can quickly scale depending on an insurer’s needs.
- Capitalizing on speed-to-market. P&C insurance has become increasingly competitive and nuanced. This is showcased by the race to service small commercial businesses that prefer simple, immediate transactions similar to retail. Cloud infrastructure provides the on-demand IT resources to help insurers get new products to market quicker, as well as expand their geographic footprint.
Cloud Deployments are Not Created Equal
Even though cloud is a necessary foundation for the modern insurance carrier, whether it delivers solutions or adds complexity is entirely dependent on the strategy and approach applied to the migration. At Connected 2020, Mike Nance, director of IT applications at Nationwide, detailed his experience and takeaways from their highly successful migration to the Insurity cloud. It was a multifaceted and expansive initiative that supported $400 million in direct written premium, nearly half of all Nationwide commercial lines business, and delivered a 45% performance improvement compared to Nationwide’s on-premise systems. Although every cloud deployment is unique, Nance and Insurity CIO Jonathan Victor shared some of the most important lessons learned from Nationwide’s journey to the cloud.
- Take a staged approach. When insurers decide to move forward with a cloud migration, there is often a desire to also immediately integrate new functionality and workflow improvements. However, adding new functionality at the onset of migration can add unnecessary risk to the deployment. Insurers should initially focus on running their existing on-premise systems in the cloud, and only consider upgrades once the systems are running optimally.
- Don’t underestimate interfaces and data migration. A popular misconception is that on-premise infrastructures can just be “lifted-and-shifted” to the cloud. In practice, it can require a completely new approach to support interfaces and their related operational processes. At the onset of a migration, both the SaaS provider and insurance carrier must clearly document all interfaces and data integrations, including identifying the stakeholders responsible for their ongoing maintenance. Detailing full visibility into the necessary connections early on mitigates the chance of facing issues towards the end of the migration. Those issues can rapidly escalate costs and add risk of migration complications.
- Embrace collaboration and change. Moving to a SaaS environment is as much of an operational change as it is an infrastructure change. The management of systems and operational processes that were once handled by an insurer’s internal teams are likely to become a shared responsibility with the new cloud partner. It’s critical for insurers to clearly document and communicate the changing roles and responsibilities of stakeholders for each cloud environment to ensure both a smooth migration and an efficient post-migration support model.
But few, if any, of the typical benefits derived from moving to the cloud can be realized if insurers aren’t working with an experienced partner that has a deep understanding of both the technology and the insurance business. This is why Insurity has had repeated success in deploying SaaS solutions with 250 clients, more than anyone else in the space. Nationwide’s decision to leverage Insurity’s expertise vs. hosting the solution on their own was the right one, according to Nance.
If insurers are still asking “Why cloud?” in 2020, then they aren’t preparing for the future. Leveraging SaaS is the shining example of how to benefit from an IT infrastructure that is built to scale in line with an insurer’s business and we are excited to be a leader in supporting insurers on this journey.